The effect of good corporate governance on financial performance and net working capital turnover as a mediation variable: evidence from Indonesia Stock Exchange (IDX)

Abstract

The purpose of this study is to test empirically and analyze the relationship of good corporate governance principles in proxies with total institutional shareholdings (INSTITUSI), number of commissioners (KOMISARIS), number of joint meetings of board of commissioners (RAPAT), and number of company committees (KOMITE) against Return on equity (ROE) and analyze the role of mediating the concept of net working capital turnover (NWCT). This research was conducted in Indonesia Stock Exchange period (2010-2014) at manufacturing companies. The calculation of total samples obtained is 185 samples of company data (for 5 years) in the manufacturing period (2010-2014). After evaluating the outlier data, there are seventeen (17) outlier data issued based on outlier evaluation, the number of samples from 185 to 168 data. In general, there are three main results of the study. First, the results show that INSTITUSI, RAPAT, and KOMITE have a significant positive effect on NWCT; only KOMISARIS variable is not proven. Second, based on the result of research, INSTITUSI, KOMITE and NWCT variables have a significant positive effect on ROE, while RAPAT and KOMISARIS are not proven. Thirdly, based on the result of mediation test by using Sobel test result, only NWCT is proven to mediate RAPAT relation to ROE, while in the other variables, mediations are not proven.